The Economics of OpenTable

Fascinating post from a restaurant proprietor hostile to the online reservation service OpenTable, who claims that the OpenTable cut on a restaurant check is approximately equal to 100 percent of the average profit on a meal. The pitch, obviously, is that joining OpenTable will reduce the excess capacity in your restaurant in increase average profit margins. The fear is that the cannibalization effect will dominate instead.

My take is that most restaurants operate with fairly inefficient pricing schemes, charging generally the same amount all seven days of the week. The promise of online reservations for the industry ought to be the ability to directly charge the consumer an extra “reservation fee” at times when tables are getting scarce.